class 6: trading the lanes - make money trading · foundations of stocks and options class 6:...

PAGE �� 1

Foundations of Stocks and Options Class 6: Trading the Lanes

Class 6: Trading the Lanes

(In-depth Line Drawing and Charting)

!Today’s Class

• Review of class so far

• Where we are going from here

• More in-depth technical analysis

• Trading with brackets (neutral trading)

!Review of Class So Far

Review

• Stock buying, selling short

• Setting up trades (using support & resistance)

• Virtual trading & tools

• Basic technical analysis

• About options (buying calls & puts)

• Getting a pulse on a markets

• Four basic strategies (buying, selling stock, buying calls, buying puts)

• Two bonus Strategies

➡ “Renting” stock (Covered Calls)

➡ “Insuring” stock (Protective Puts)

!

PAGE �� 2


Review (continued)

• Basic chart Reading & Patterns

➡ Channeling stock & trends

➡ Basic line drawing

• Market Psychology (why the market moves)

• Intro to Dow Theory

!Where We Are Going

The Road Ahead

• Micro Picture

• In-depth Technical Charting & Line Drawing

➡ Support & Resistance

➡ Trend Lines

➡ Trading Lanes

➡ Trading Neutral (with brackets)

➡ Price Targeting

• Moving Averages & Basic Indicators

➡ Moving Average Crosses

➡ Moving Averages as Support & Resistance

➡ Timing Trades with Moving Averages

➡ 3 Basic Indicators

• Trading Neutral & Trading with a plan

➡ Setting up your trades

➡ Contingency orders

➡ Entries/Exits

PAGE �� 3


➡ Setting Stops

➡ Remove the Emotion with a Plan

• Level 2 picks up...

• Chart Patterns (2 classes)

➡ Reversal patterns

➡ Continuation patterns

➡ Consolidation patterns

➡ 15 most common & accurate

➡ How to trade them

• Candlesticks (2 Classes)

➡ Individual Candles (what they mean)

➡ Single - Line Candles

➡ Two - Line Candles

➡ Three - Line Candles

➡ Combining candles with lines, moving averages, and chart patterns

• Start Putting it all together

➡ Training your skills

➡ Trade Simulation

➡ Trading Journal

➡ Make your trading skills automatic

• Final Confirmation

• Technical Indicators

➡ Different types of indicators

➡ 9 Indicators I trade with

➡ How they work and how to use them

PAGE �� 4


➡ Putting lines, averages, patterns, candles, and indicators together into a trading system

• Finishing touches

➡ Strategies

➡ Trading multiple situations

➡ Combining strategies

➡ Trading any type of market

➡ Applying to intra-day trading

➡ Money management

!In-Depth Line Drawing/Charting

Support - The price point where a stock finds more Buying pressure than Selling pressure and pushes the price higher (Bullish)

Resistance - The price point where a stock finds more Selling pressure than Buying pressure and pushes the price lower (Bearish)

!

PAGE �� 5


Support and Resistance - Rules

• Always start with a line chart

• Use Candles to confirm the points

• 2 points make a line

• 3 points make a trend (or pattern)

• The more times a stock “hits” a line, the stronger that point of support or resistance.

What you need to remember:

• Support & Resistance alone are not enough to trade from.

• Use S&R to give us a frame work.

• Combine S&R with other technicals to help us trade.

• S&R are the foundation of all other “line” analysis

!Support and Resistance - Channels

Channel - A stock moving sideways between support and resistance in a predictable repeating pattern.

PAGE �� 6


Upward Channel (Up-trend) - A stock moving sideways between support and resistance in a predictable repeating pattern While Making Higher Highs & Higher Lows

Downward Channel (Down-trend) - A stock moving sideways between support and resistance in a predictable repeating pattern While Making Lower Highs & Lower Lows

!What is a Trendline?

A trendline is simply a support or a resistance that moves at an angle instead of horizontal.

PAGE �� 7


How To Draw Trendlines

Rules:

• Always start with a line chart

• Always start with a change of direction

• Takes 2 points to begin, 3 points to “define”

• Check candlesticks for confirmation

!Defining Trendlines

In a trend, one line is of primary importance.

• In an uptrend = “Support”

• In a downtrend = “Resistance”

• We will refer to this line as the “control” line

PAGE �� 8


“Range Line” helps define the range of the trend

• Parallel

• “Close” (not exact)

• Start off of the first “retracement”

• Trading Lane

OLD Resistance, becomes NEW support

PAGE �� 9


Support & Resistance - Fanlines

• The result of “varying angles” of acceleration and deceleration of a trend

• Old support becomes new resistance (and vice versa)

• Occur much more frequently in Bull markets than Bear markets

!Accelerating Line

• Occurs when a trend is becoming steeper

• Usually seen in extreme market conditions (a bubble or a panic)

• When the line is eventually broken, the next support or resistance is the previous angle of attack

!

PAGE �� 10


Decelerating Line

• Occurs when a trend is weakening

• Evidenced by breaking trend lines without revealing a clear reversal

• Generally after 3 lines are drawn the reversal is confirmed

!Support & Resistance

Purpose: Support & Resistance, Trendlines, & Fanlines combine to help us see:

• Trading behavior

• Price targets

• Pivot points

• Logical analysis

• Trading opportunity

!

PAGE �� 11


Price Targeting

• Previous price points become future targets (pivot point)

• The more times a price hits that point, the stronger the target

!

!Setting Up The Trade

• Draw a “neutral” bracket around the pivot point.

• If the stock bounces, trade bullish

• If it breaks through, trade bearish

PAGE �� 12


Action Steps • Put your line drawing knowledge to work

• Notice how different stocks “behave”

• Determine some “pivot points”

• Try setting up some “bracket trades”

• Place some trades and see how they go (virtual of course!)

• Go to Next Class - Moving Averages/Indicators

!Remember we are here to help you all throughout your journey in the Stock Market. Reach out anytime through email at [email protected] or

Schedule a Call and one of our Student Coaches will contact you.

class 6: trading the lanes - make money trading · foundations of stocks and options class 6:...

Documents